The Costco-Tiffany Litigation Was a Huge Waste of Time

Looking at the dozens of exhibits in the Tiffany vs. Costco litigation, it is hard not to conclude the case was a waste of everyone’s time and a drain on the resources of our legal system. 

For those who need a refresher, here is how the case unfolded:

In November 2012, a customer told Tiffany that a Huntington Beach, Calif., Costco was selling diamond engagement rings marked as Tiffany, which were not rings manufactured by the noted retailer. Tiffany investigated and found other examples. 

After Tiffany contacted Costco, the latter agreed to stop using the Tiffany descriptor. But efforts to reach an amicable agreement failed, according to Costco CEO Craig Jelinek, in an internal email reprinted on brandchannel.com. On Feb. 14, 2013, Tiffany filed a suit charging Costco with counterfeiting and trademark dilution, among other counts.

Costco responded that Tiffany referred to the ring’s settings, and it filed a motion to have Tiffany setting ruled a generic term. That is an interesting question, though, as Tiffany’s lawyers argued, it holds limited relevance to the specifics of this case, as Costco is accused of using the wordTiffany on its own, sans setting. In the email, Jelinek said, “In retrospect, it would have been better had we not used that description the way we did.” So here we have a company, which even its CEO admits could have done better in its description, now trying to weaken the trademark of the affected brand.

Regardless, New York Judge Laura Taylor Swain ruled that a “genuine factual dispute” exists as to whether Tiffany setting was generic. Eventually, the argument over this point generated mounds of exhibits and testimony, as the two sides called on industry experts and even the publisher of theMerriam-Webster Dictionary. 

At one point, Swatch Group weighed in, given that it has engaged in (bitter and drawn-out) litigation with Costco, and is currently fighting a (similarly bitter and drawn-out) battle with Tiffany. 

In perhaps the suit’s nadir, while cross-examining a customer (and Tiffany witness) who bought one of the rings in question, Costco’s attorney took note of her multiple jewelry purchases and asked, “Do you know what money laundering is?” This woman is, let’s remember, a Costco customer, and this question is not a great signal of how the company treats shoppers who talk about issues with the company. (Costco’s attorney later defended the question as legitimate, saying her testimony had credibility problems; Tiffany’s counsel said he was “embarrassed” by it.) 

Last month, Judge Swain ruled in Tiffany’s favor on summary judgment. As Cecilia Gardner of the Jewelers Vigilance Committee told me, this ruling means that jewelers should try not to use the term Tiffany setting in the future. So small retailers may be most hurt by this, not that anyone involved likely cares. 

I feel Tiffany has the stronger argument here, but only to a point. It has the right to enforce its trademark, but charging Costco with counterfeiting struck me as overwrought, even if the court ruled otherwise. Considering that Costco had already agreed to stop using Tiffany, and taking into account the huge waste of everyone’s time (including employees of the two companies) and taxpayer money involved, this case should have been settled a long time ago.

But it isn’t over, even now. Costco has applied for an emergency appeal, citing the “ongoing irreparable harm to Costco’s business reputation” from the district court ruling. This may keep going until they both run out of options. 

JCK News Director